Recent investigations have
revealed a rash of irregularities in public school financial audits,
particularly in the Metro Detroit area. Many of the districts involved in
financial scandals are cutting student programs, initiating staff layoffs, and
increasing taxes.

"Maybe if the district watched
its money a little closer, the children would have all the books they need,"
Gladys Sabbath, a grandmother of River Rouge School District students, told
The Detroit News in regard to a
recently-exposed incident.

The recent scandals
demonstrate that the current system of financial accountability is leaving much
room for abuse. State law requires school districts to operate with balanced
budgets and hire outside parties to conduct annual audits. Districts facing
deficits must submit a debt-reduction plan to the state, or risk being placed on
a "watch list" for financially troubled schools.

River Rouge: Selling student
programs down the river

Earlier this year, four River
Rouge school officials were suspended after a district investigation found $1
million in potential financial irregularities. Yet, at the same time, district
officials lamented state budget cuts and threatened to cut a school reading
program due to budget constraints. In addition, the district showed
above-average expenditures and below-average student performance when compared
to peer districts.

The River Rouge scandal was
reported in The Detroit News and
Detroit Free Press. A report
released by the district showed hundreds of thousands in funds spent without
proper school board approval, most at the discretion of Superintendent Benjamin
Benford II.

The findings, reported in the
Detroit Free Press included:

* Over $350,000 spent on TV
studio and athletic equipment purchased without required competitive bids and
without school board approval. School officials reported that much of the
equipment was missing.

* For three consecutive
years, Benford received pay raises between 14 percent and 30 percent above
what the school board had approved. His salary in the 2001-02 school year was
approved at $134,293, but Benford received over $190,000.

* The sale of a district
high school property went to a long-time associate of Benford's for well under
its market value. In addition, the same associate was paid nearly $40,000 by
the district for unsubstantiated expenses.

* District records showed
Benford's son being paid a full-time wage by the district for three years, but
do not verify whether he actually performed work during that time period.
Moreover, if the schools employed Benford's son, he was employed in violation
of a district policy that prohibits hiring relatives of the superintendent or
school board.

During the same time period
these questionable financial decisions were being made and carried out, River
Rouge school officials were voicing concern over state education funding
reductions and threatened to cut a district reading program for elementary
students.

In 2001, River Rouge received
$189,258 in state funds for an elementary reading program; the funds were added
to nearly $50,000 in local money, according to a Free Press
report.

When the state threatened to
cut funding for the program due to a state budget crisis, district curriculum
director Marie Miller told the Free Press
that the program, which served 540 River Rouge
children, would have to be scaled back due to budget constraints.

"We are struggling to improve
student achievement, so [the program is] one more step to move us in that
positive direction," she told the Free Press.
"Without those funds, we'll have to cut the program by two-thirds."

According to Standard and
Poor's (S&P) School Evaluation Services (www.ses.standardandpoors.com),
a comprehensive analysis of Michigan public school achievement and finances,
River Rouge spends significantly more than similar-sized school districts, while
producing lower-than-average student performance on Michigan Educational
Assessment Program (MEAP) tests.

"Relative to other K-12 school
districts in Michigan, River Rouge School District generates exceptionally
below-average student results with well above-average spending per student," the
S&P analysis states. "The proportion of MEAP tests taken by students in River
Rouge School District that meet or exceed state standards is 37.6 [percent]."

Hence, as River Rouge students
suffered with threatened program cuts and lower-than-average test scores, school
officials were allegedly stealing from district coffers.

Detroit Public Schools:

Years
of scandals, teacher layoffs, program cuts

Over the last two decades,
audits of Detroit Public Schools have uncovered a myriad of irregularities, from
misplaced receipts for school supplies to a complex bribery scheme involving a
contractor who provided milk to district schools.

In 2001, the Michigan Supreme
Court refused to hear an appeal by Detroit Public Schools, forcing the district
to pay an $11.1-million judgment for a mid-1980s bribery scheme that sent a
former school board president to prison, according to the Detroit Free
Press.

In 2002, the Detroit
Free Press reported that audits of Detroit
schools showed over $305,000 in school money missing and hundreds of thousands
of dollars more misspent and misappropriated.

S&P reports that, "Relative to
other K-12 school districts in Michigan, Detroit Public Schools generates well
below-average student results with well above-average spending per student."

While Detroit school officials
were mismanaging school funds, the district was spending more than other
districts and providing poorer education, scaling back teaching positions and
cutting programs.

East Detroit: Financial
scandals bring criminal charges;

district cuts jobs, student programs

East Detroit Public Schools
offers the most egregious example of district financial scandals.

Audits of the district in
recent years uncovered a rash of misspent funds, including a complex bribery
scheme involving several school officials, private contractors, and over $1
million spent on unfinished school construction projects, and over $6 million in
cost overruns.

In 1996, East Detroit voters
approved a $28-million bond for school construction and maintenance. Years
later, audits showed millions of dollars were wasted and embezzled in a complex
scheme between school officials and contractors working on district buildings.
School officials received trips to Las Vegas and cash from contractors in return
for obtaining district contracts for a construction company.

At the end of the 1999-2000
fiscal year, auditors condemned the district's financial practices and uncovered
a $2.4-million deficit, according to the Detroit Free Press.
The deficit led to the elimination 37 district jobs and the closure of school
technology programs, in addition to unfinished school building projects.

School officials involved in
the scandal face prison sentences for racketeering and other charges.

Numerous other district
financial scandals were uncovered in Free Press
reports, involving a variety of misspent and
missing funds. Yet some state official seem to take the scandals in stride, even
given the severity of the situation.

"People will be people," T. J.
Bucholz, spokesman for the state Department of Education, told the
Detroit Free Press. "Sometimes they are very
honest and sometimes they will be otherwise."

Bucholz said school
administrators may not deserve all the blame for the financial scandals.

"Sometimes it's not just the
district personnel, sometimes it's the culture," he told the Free Press.
"It's a culture that does not put children first, a culture that's more
concerned about power and control and making sure the adults get paid."

State and federal
investigations, and in some cases criminal charges, are pending in many of the
financial scandal cases. And, many parents and taxpayers are encouraging state
officials to consider revisions to the current system of school financial
accountability.